TSX:AD $9.85 (0.00) Quotes delayed 20 minutes
Press Release
Alaris Royalty Corp. Releases Second Quarter Financial Results
CALGARY, ALBERTA--(Marketwire - July 29, 2010) - Alaris Royalty Corp. (TSX:AD) ("Alaris" or the "Corporation") today announced its results for the three and six months ended June 30, 2010.
After paying dividends of $0.07 per share in January and February, the Corporation increased the dividend rate by 14.3% to $0.08 per share in each of March, April, May and June. Total dividends paid for the three and six months ended June 30, 2010 equaled $0.24 per share ($3,135,470 in aggregate) and $0.46 per share ($5,695,090 in aggregate), respectively, resulting in a payout ratio of approximately 90% of operating cash flow.
Revenues for the three months ended June 30, 2010 were $3.9 million compared to $4.3 million in the prior year period, but nonetheless, were slightly better than expected as a result of new purchases of preferred units in the quarter. The decrease of 10% was due to the net impact of performance adjustments to the annual distributions received from the Corporation's Private Company Partners (as defined herein), most notably the expected decline in distributions from LMS Reinforcing Steel Group ("LMS"). A significant portion of the LMS decrease was offset by an increase in distributions from LifeMark Health Limited Partnership ("LifeMark") as a result of its 4.5% same clinic sales adjustment effective January 1, 2010 and the impact of additional purchases of preferred units in LifeMark in October 2009 and May 2010. As well, the addition of a new Private Company Partner in May 2010, namely KMH Limited Partnership ("KMH"), added $126,000 of new revenue in the quarter.
For the three months ended June 30, 2010, the Corporation recorded net income of $2.5 million and EBITDA of $3.0 million compared to net income of $2.6 million and EBITDA of $3.4 million for the prior year period. The decrease in net income and EBITDA can be attributed to the decline in the distributions received from LMS which were partially offset by an increase in distributions received from LifeMark and new distributions received from KMH. The expenses of the Corporation did not change materially from the prior year period.
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3 months 3 months
Reconciliation of Net Income to ending ending
EBITDA (thousands) June 30, June 30,
2010 2009
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Net Income (Loss) $2,478 $2,630
Adjustments to Net Income:
Amortization 47 56
Interest 385 533
Income tax expense 55 176
EBITDA $2,965 $3,395
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"We continue to see positive results from each of our Private Company Partners, and in particular LMS. LMS has seen meaningful increases to its production volumes in each of the past several months, margins are returning to more normal levels and year to date nine month gross profit is 19% ahead of last year's pace." said Steve King, President and CEO, Alaris Royalty Corp. "Additionally, LifeMark is well on the way to delivering another solid same clinic sales performance for its 2010 fiscal year. The recent monthly results for KMH, End of the Roll Carpet & Vinyl ("EOTR") and MEDIchair Ltd. ("MEDIchair") show that these companies are also performing well compared to the prior year".
Outlook
Alaris' agreements with LifeMark, LMS, EOTR, MEDIchair and KMH (collectively, the "Private Company Partners") are estimated to provide the Corporation approximately $16.4 million of revenues for fiscal 2010. In the next quarter, such agreements call for approximately $4.15 million of revenues for Alaris. General and administrative expenses are estimated at $600,000 per quarter, including all public company costs. Alaris' senior debt facility is drawn to $20.65 million and the interest rate on that debt was 5.50% at June 30, 2010. $1.2 million of subordinated debt is also outstanding with an interest rate of 13%.
"With the addition of our new partner KMH, and the further purchase of preferred units in LifeMark in the second quarter, we have added over $500,000 per quarter in new revenues and the same amount in net income as there are no additional recurring business expenses that come with the addition of a new Partner. We will continue to seek new partnerships in order to further diversify our asset base and add accretive value for our shareholders," said Mr. King.
The Consolidated Balance Sheet, Statement of Operations and Deficit and Statement of Cash Flows are attached to this news release. Alaris' financial statements and MD&A are available on SEDAR at www.sedar.com and on our website at www.alarisroyalty.com.
About the Corporation:
Alaris provides alternative financing to the Private Company Partners in exchange for royalties or distributions with the principal objective of generating stable and predictable cash flows for dividend payments to its shareholders. Royalties or distributions from the Private Company Partners are structured as a percentage of a "top line" financial performance measure such as gross margin and same-store sales and rank in priority to the owners' common equity position.
Non-GAAP Measure
The term EBITDA is a financial measure used in this news release that is not a standard measure under Canadian generally accepted accounting principles ("GAAP"). The Corporation's method of calculating EBITDA may differ from the methods used by other issuers. Therefore, the Corporation's EBITDA may not be comparable to similar measures presented by other issuers.
EBITDA refers to net earnings (loss) determined in accordance with GAAP, before depreciation and amortization, net of gain or loss on disposal of capital assets, interest expense and income tax expense. EBITDA is used by management and many investors to determine the ability of an issuer to generate cash from operations. Management believes EBITDA is a useful supplemental measure from which to determine the Corporation's ability to generate cash available for debt service, working capital, capital expenditures, income taxes and dividends. The Corporation has provided a reconciliation of net income to EBITDA in this news release.
The term EBITDA should only be used in conjunction with the Corporation's annual audited and quarterly reviewed financial statements, excerpts of which are available below, while complete versions are available on SEDAR at www.sedar.com.
Forward-Looking Statements
This news release contains forward-looking statements under applicable securities laws. Statements other than statements of historical fact contained in this news release are forward-looking statements, including, without limitation, management's expectations, intentions and beliefs concerning the growth, results of operations, performance and business prospects and opportunities of the Corporation and the Private Company Partners, the general economy, the future financial position or results of the Corporation, business strategy, and plans and objectives of or involving the Corporation or the Private Company Partners. Many of these statements can be identified by looking for words such as "believe", "expects", "will", "intends", "projects", "anticipates", "estimates", "continues" or similar words or the negative thereof. In particular, this news release contains forward-looking statements regarding the anticipated financial and operating performance of the Private Company Partners in 2010, the revenues to be received by Alaris in its next fiscal quarter and its general and administrative expenses, the ability of the Private Company Partners to pay anticipated distributions to the Corporation, the Corporation's intention to add new Private Company Partners, as well as statements concerning the Corporation's ability to pay monthly dividends to its shareholders.
By their nature, forward-looking statements require Alaris to make assumptions and are subject to inherent risks and uncertainties. Assumptions about the performance of the Canadian and U.S. economies in 2010 and how that will affect Alaris' business and our ability to identify and close new opportunities with new Private Company Partners are material factors considered by Alaris management when setting the outlook for Alaris. Key assumptions include, but are not limited to, assumptions that the Canadian and U.S. economies will grow moderately in 2010, that interest rates will remain low, that the Private Company Partners will continue to make distributions to Alaris as and when required, that the businesses of the Private Company Partners will continue to grow, and that Alaris will have the ability to raise required equity and/or debt financing on acceptable terms. Management of Alaris has also assumed that capital markets will improve somewhat and that the Canadian dollar will strengthen modestly relative to the U.S. dollar. In determining expectations for economic growth, management of Alaris primarily consider historical economic data provided by the Canadian and U.S. governments and their agencies.
There can be no assurance that the assumptions, plans, intentions or expectations upon which these forward-looking statements are based will occur. Forward-looking statements are subject to risks, uncertainties and assumptions and should not be read as guarantees or assurances of future performance. The actual results of the Corporation and the Private Company Partners could materially differ from those anticipated in the forward-looking statements contained herein as a result of certain risk factors, including, but not limited to, the following: the dependence of Alaris on the Private Company Partners; reliance on key personnel; general economic conditions; failure to complete or realize the anticipated benefit of Alaris' financing arrangements with the Private Company Partners; government regulations; and risks relating to the Private Company Partners and their businesses. Additional risks that may cause actual results to vary from those indicated are discussed under the heading "Risk Factors" in the Corporation's Annual Information Form for the year ended December 31, 2009, which is filed under the Corporation's profile at www.sedar.com. Accordingly, readers are cautioned not to place undue reliance on any forward-looking information contained in this news release. Statements containing forward-looking information reflect management's current beliefs and assumptions based on information in its possession on the date of this news release. Although management believes that the expectations represented in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct.
ALARIS ROYALTY CORP.
Consolidated Balance Sheets, Unaudited
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June 30, December 31,
2010 2009
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Assets
Current assets:
Cash $ 1,804,277 $ 3,826,000
Accounts receivable 295,792 2,470
Prepaid expenses 232,114 103,472
Future income taxes (note 10) 3,141,429 2,996,000
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5,473,612 6,927,942
Investment tax credit receivable (note 10) 11,030,007 11,030,007
Future income taxes (note 10) 23,720,065 22,248,900
Equipment (note 4) 70,068 74,477
Investments (note 3)
Preferred LP units 124,369,176 111,124,642
Intangible assets 12,983,531 13,070,150
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137,352,707 124,194,792
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$ 177,646,459 $ 164,476,118
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Liabilities and Shareholders'
Equity/(Deficit)
Current liabilities:
Accounts payable and accrued liabilities $ 437,599 $ 939,085
Dividends payable 1,100,059 802,604
Future income taxes (note 10) 47,808 47,808
Bank indebtedness (note 5) 4,233,333 2,850,000
Subordinated debt (note 5) 1,200,000 6,500,000
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7,018,799 11,139,497
Bank indebtedness (note 5) 16,416,667 19,700,000
Future income taxes (note 10) 4,177,635 1,347,755
Deferred credit (note 10) 22,215,040 23,661,017
Shareholders' equity/(deficit):
Shareholder's capital (note 6) 130,435,919 111,125,039
Warrants (note 6) 523,415 845,000
Contributed surplus 2,290,133 1,471,333
Deficit (5,431,149) (4,813,523)
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127,818,318 108,627,849
Commitments (note 12)
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$ 177,646,459 $ 164,476,118
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ALARIS ROYALTY CORP.
Consolidated Statements of Operations and Deficit, Unaudited
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Three months ended Six months ended
June 30, June 30,
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2010 2009 2010 2009
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Revenues:
Royalties and
distributions $ 3,895,625 $ 4,342,389 $ 8,088,487 $ 8,941,000
Interest and other 1,030 1,800 2,190 3,637
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3,896,655 4,344,189 8,090,677 8,944,637
Expenses:
Interest 385,341 533,482 868,992 1,108,961
Non-cash stock based
compensation (note 8) 444,500 426,776 886,000 867,820
Salaries and benefits 205,614 237,766 423,826 450,677
Corporate and office 124,887 113,686 335,955 265,147
Legal and accounting
fees 99,033 120,986 202,771 258,258
Stock based compensation
(note 8) 57,378 49,687 107,591 123,028
Depreciation and
amortization 47,256 55,600 94,386 113,538
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1,364,009 1,537,983 2,919,521 3,187,429
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Net Income before taxes 2,532,646 2,806,206 5,171,156 5,757,208
Future income tax
expense (note 10) 54,665 175,834 93,692 230,209
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Net Income and other
comprehensive income for
the period 2,477,981 2,630,372 5,077,464 5,526,999
Deficit, beginning of
period (4,773,660) (13,171,811) (4,813,523) (13,239,854)
Dividends to
shareholders (note 7) (3,135,470) (1,916,840) (5,695,090) (4,745,424)
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Deficit, end of period $(5,431,149) $(12,458,279) $(5,431,149) $(12,458,279)
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Earnings per share,
basic $ 0.20 $ 0.29 $ 0.42 $ 0.61
Earnings per share,
fully diluted $ 0.19 $ 0.27 $ 0.40 $ 0.57
Weighted average shares
outstanding, basic 12,684,074 9,127,403 12,135,093 9,125,711
Weighted average shares
outstanding, fully
diluted 13,231,666 9,730,953 12,676,376 9,729,261
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ALARIS ROYALTY CORP.
Consolidated Statements of Cash Flows, Unaudited
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Three months ended Six months ended
June 30, June 30,
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2010 2009 2010 2009
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Cash provided by
(used in):
Operations:
Net Income for
the period $ 2,477,981 $ 2,630,372 $ 5,077,464 $ 5,526,999
Add non-cash
items:
Depreciation and
amortization 47,256 55,600 94,386 113,538
Non-cash stock based
compensation
(note 8) 444,500 426,776 886,000 867,820
Income tax
expense 54,665 175,834 93,692 230,209
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3,024,402 3,288,582 6,151,542 6,738,566
Change in
non-cash working
capital (141,521) (186,126) (923,448) (54,551)
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2,882,881 3,102,456 5,228,094 6,684,015
Investing:
Purchase of
capital assets (3,360) (13,121) (3,360) (13,121)
Purchase of
Preferred LP units (13,194,534) - (13,244,533) -
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(13,197,894) (13,121) (13,247,893) (13,121)
Financing:
Proceeds from
exercise of
warrants 1,065,750 - 3,282,375 -
New share capital 15,313,346 - 15,313,346 -
Dividends to
shareholders (2,976,603) (1,916,664) (5,397,645) (5,201,039)
Repayment of debt (6,250,000) (700,000) (7,200,000) (1,000,000)
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7,152,493 (2,616,664) 5,998,076 (6,201,039)
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Increase/(decrease)
in cash (3,162,520) 472,671 (2,021,723) 469,855
Cash, beginning of
period 4,966,797 1,741,120 3,826,000 1,743,936
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Cash, end of
period $ 1,804,277 $ 2,213,791 $ 1,804,277 $ 2,213,791
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